Sale and Agreement to Sell

Definition

Sec 4(1) of the Indian Sale of Goods Act, 1930 defines the contract of he sale of goods in the following manner:

“ A contract of sale of goods is a contract whereby the seller transfers or agrees to transfer the property in goods to the buyer for a price”.

The term “Contract of sale of goods’ is a generic term and it includes:

a. Sale and b. An agreement to sell

where the seller transfers the ownership rights to the buyer immediately on making the contract, it is the contract of sale, but where the ownership rights are to pass on some future date upon the fulfillment of certain conditions then it is called an agreement to sell.

Essentials of a contract of sale Two parties- buyer and seller

Goods

Price

Transfer of general property

Essential elements of a valid contract

A contract of sale may be absolute or conditional.

Difference between

SALE

Ownership passes to the buyer.

It is a executed contract.

Risk of loss falls on the buyer.

Seller cannot resell the

goods. It can be in case of

existing and specific goods.

AGREEMENT TO SELL

Ownership remains with the seller.

It is a executory contract. Risk of loss falls on

the seller. Seller can sell

goods to third party. It can be in case of

future and unascertained goods.

SALE

In case of breach of a contract, seller can sue for the price of the goods .

The seller is only entitled to the ratable dividend of the price due if the buyer becomes insolvent.

The buyer is entitled to recover the specific property from the assignee if the seller becomes insolvent.

AGREEMENT TO SELL

In case of breach of a contract, seller can sue only for damages not for the price.

The seller may refuse to sell the goods to the buyer w/o payments if the buyer becomes insolvent.

Buyer can claim only ratable dividend for the money paid.

SALE &AGREEMENT TO SELL-DISTINCTION1-Nature of contractsale-a sale is an executed contract

Agreement to sell-is an executory contract. 2-Transfer of Property.Sale-the property in goods passes from seller to buyer immediately.Agreement to sell-property in goods passes from seller to buyer at some future date or subject to fulfillment of certain condition.

3 )Risk of loss-in a sale if the goods are destroyed, the risk of loss falls on the buyer even if the goods were in the possession of seller.In agreement to sell if goods are destroyed the risk of loss falls on a seller even if the goods were in the possession of buyer.

4)Consequences of the breachOn breach of agreement to sell by the seller ,buyer can sue the seller for damages.

But if after a sale the seller breaks the contract the buyer may sue for delivery of goods or for damages.In an agreement to sell ,if the buyer fails to accept the goods the seller may sue for the damages only and not for the price. On a sale ,if the buyer does not pay the price ,the seller may sue for the price.

5 )Insolvency of the buyerin a sale if the buyer is adjudged an insolvent ,the seller in the absence of a lien over the goods is bound to deliver the goods to the official receiver or assignee .The seller will ,however ,be entitled to a rateable dividend for the price of goods.In the agreement to sell, when the buyer becomes insolvent before he pays for the goods ,the seller may not part with the goods.

6) Insolvency of the sellerIn the sale ,if the seller becomes insolvent, the buyer is entitled to recover the goods from the official receiver or assignee.In an agreement to sell , if the buyer has already paid the price and the seller becomes insolvent ,buyer can claim only a rateble dividend and not the goods.

8) Right of re-sales

In a sale ,the seller cannot resell the goods even if he is in possession of goods after sale.In an agreement to sell ,the seller may sell the goods since ownership is with the seller.